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The zones of discrimination for M-Score is as such:
An M-Score of less than -2.22 suggests that the company is not an accounting manipulator.
An M-Score of greater than -2.22 signals that the company is likely an accounting manipulator.
During the past 13 years, the highest Beneish M-Score of Flex Ltd was 1.16. The lowest was -6.74. And the median was -2.51.
The M-score was created by Professor Messod Beneish. Instead of measuring the bankruptcy risk (Z-Score) or business trend (F-Score), M-score can be used to detect the risk of earnings manipulation. This is the original research paper on M-score.
The M-Score Variables:
The M-score of Flex Ltd for today is based on a combination of the following eight different indices:
|M||=||-4.84||+||0.92 * DSRI||+||0.528 * GMI||+||0.404 * AQI||+||0.892 * SGI||+||0.115 * DEPI|
|=||-4.84||+||0.92 * 0.9358||+||0.528 * 0.9564||+||0.404 * 1.2812||+||0.892 * 0.9824||+||0.115 * 0.8907|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.2026||+||4.679 * -0.0511||-||0.327 * 0.9876|
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $2,341 Mil.|
Revenue was 6008.525 + 5876.813 + 5772.698 + 6763.177 = $24,421 Mil.
Gross Profit was 313.691 + 405.995 + 406.337 + 452.467 = $1,578 Mil.
Total Current Assets was $8,459 Mil.
Total Assets was $12,661 Mil.
Property, Plant and Equipment(Net PPE) was $2,336 Mil.
Depreciation, Depletion and Amortization(DDA) was $622 Mil.
Selling, General & Admin. Expense(SGA) was $1,012 Mil.
Total Current Liabilities was $6,854 Mil.
Long-Term Debt was $2,678 Mil.
Net Income was -2.508 + 105.729 + 61.344 + 148.91 = $313 Mil.
Non Operating Income was -8.388 + -3.529 + -1.481 + -44.415 = $-58 Mil.
Cash Flow from Operations was 279.62 + 263.932 + 196.673 + 277.777 = $1,018 Mil.
|Accounts Receivable was $2,547 Mil.
Revenue was 6316.762 + 5566.248 + 5951.6 + 7025.054 = $24,860 Mil.
Gross Profit was 396.916 + 352.341 + 378.817 + 408.657 = $1,537 Mil.
Total Current Assets was $8,985 Mil.
Total Assets was $12,660 Mil.
Property, Plant and Equipment(Net PPE) was $2,218 Mil.
Depreciation, Depletion and Amortization(DDA) was $511 Mil.
Selling, General & Admin. Expense(SGA) was $857 Mil.
Total Current Liabilities was $7,033 Mil.
Long-Term Debt was $2,618 Mil.
1. DSRI = Days Sales in Receivables Index
A large increase in DSR could be indicative of revenue inflation.
|DSRI||=||(Receivables_t / Revenue_t)||/||(Receivables_t-1 / Revenue_t-1)|
|=||(2341.393 / 24421.213)||/||(2546.81 / 24859.664)|
2. GMI = Gross Margin Index
Measured as the ratio of gross margin in year t-1 to gross margin in year t.
Gross margin has deteriorated when this index is above 1. A firm with poorer prospects is more likely to manipulate earnings.
|=||(GrossProfit_t-1 / Revenue_t-1)||/||(GrossProfit_t / Revenue_t)|
|=||(1536.731 / 24859.664)||/||(1578.49 / 24421.213)|
3. AQI = Asset Quality Index
AQI is the ratio of asset quality in year t to year t-1.
|AQI||=||(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t)||/||(1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)|
|=||(1 - (8458.62 + 2335.959) / 12661.134)||/||(1 - (8985.494 + 2218.03) / 12660.339)|
4. SGI = Sales Growth Index
Ratio of sales in year t to sales in year t-1.
Sales growth is not itself a measure of manipulation. However, growth companies are likely to find themselves under pressure to manipulate in order to keep up appearances.
5. DEPI = Depreciation Index
Measured as the ratio of the rate of depreciation in year t-1 to the corresponding rate in year t.
DEPI greater than 1 indicates that assets are being depreciated at a slower rate. This suggests that the firm might be revising useful asset life assumptions upwards, or adopting a new method that is income friendly.
|DEPI||=||(Depreciation_t-1 / (Depreciaton_t-1 + PPE_t-1))||/||(Depreciation_t / (Depreciaton_t + PPE_t))|
|=||(511.056 / (511.056 + 2218.03))||/||(621.86 / (621.86 + 2335.959))|
6. SGAI = Sales, General and Administrative expenses Index
The ratio of SGA expenses in year t relative to year t-1.
SGA expenses index > 1 means that the company is becoming less efficient in generate sales.
|SGAI||=||(SGA_t / Sales_t)||/||(SGA_t-1 /Sales_t-1)|
|=||(1012.198 / 24421.213)||/||(856.787 / 24859.664)|
7. LVGI = Leverage Index
The ratio of total debt to total assets in year t relative to yeat t-1.
An LVGI > 1 indicates an increase$sgai= in leverage
|LVGI||=||((LTD_t + CurrentLiabilities_t) / TotalAssets_t)||/||((LTD_t-1 + CurrentLiabilities_t-1) / TotalAssets_t-1)|
|=||((2678.115 + 6853.667) / 12661.134)||/||((2618.178 + 7032.78) / 12660.339)|
8. TATA = Total Accruals to Total Assets
Total accruals calculated as the change in working capital accounts other than cash less depreciation.
|=||(NetIncome_t - NonOperatingIncome_t||-||CashFlowsfromOperations_t)||/||TotalAssets_t|
|=||(313.475 - -57.813||-||1018.002)||/||12661.134|
An M-Score of less than -2.22 suggests that the company will not be a manipulator. An M-Score of greater than -2.22 signals that the company is likely to be a manipulator.
Flex Ltd has a M-score of -2.75 suggests that the company will not be a manipulator.
Altman Z-Score, Piotroski F-Score, Accounts Receivable, Revenue, Gross Profit, Total Current Assets, Total Assets, Property, Plant and Equipment, Depreciation, Depletion and Amortization, Selling, General & Admin. Expense, Total Current Liabilities, Long-Term Debt, Net Income, Non Operating Income, Cash Flow from Operations
Flex Ltd Annual Data
Flex Ltd Quarterly Data